2Q 2010 | Metro Atlanta Office Market Report by Colliers International

Q2 2010 | OFFICE

ATLANTA

MARKET REPORT

2Q Office Activity Strong in Atlanta

MARKET INDICATORS Q2 2010 VACANCY

NEXT QTR

—

NET ABSORPTION CONSTRUCTION

—

RENTAL RATE CAP RATES

—

Despite a relatively weak first half of the year, Atlanta’s office market finds itself much better positioned at this point in 2010 than at mid-year 2009. Though office vacancy for the region remains in record territory—a byproduct of occupancy losses in 2009 and the recent addition of 3 million square feet to inventory—positive activity has made its way back into the market. Atlanta office posted its strongest quarterly absorption since 2008 in second quarter. Occupancies increased by a total of 177,463 square feet over the past three months. Combined with a revised first quarter, the positive results in second quarter helped bring year-to-date absorption to just over 100,000 square feet; showing not only a stabilized office market, but also the possibility Atlanta will finish the year with more office space filled than vacated. The quarter’s absorption was led by activity in Class B properties. Two of the largest move-ins of second quarter were in Class B space. They include The Atlanta Journal-Constitution relocating from its longtime Downtown offices to 127,823 square feet of sublease space at 223 Perimeter Center in Central Perimeter, and Physician’s Education moving into almost 100,000 square feet at Corporate Spectrum in Northwest Atlanta. Class A properties also showed a number of large move-ins in second quarter, though the positive impact was dampened by the consolidated nature of the moves. It has been over a year and a half since the Atlanta office market experienced positive absorption totaling more than 100,000 square feet in one quarter; and almost three years since back-to-back quarters of increased occupancy took place. Given the momentum in the market and the amount of office space expected to be filled next quarter, consecutive quarters of absorption are a sure bet. Office leasing and tenant demand remain strong in Atlanta. Headquarter relocations, tenant expansions and new industry growth have been the biggest drivers to this year’s positive activity. continued on page 2

ATLANTA OFFICE

NEW SUPPLY, ABSORPTION AND VACANCY RATES

UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)

25%

10,000,000 $24.00

$24.00

8,000,000

$23.00

2,000,000

10%

Market AVG

2010

2009

2008

2007

2006

(4,000,000)

5% 0%

Absorption

www.colliers.com/atlanta

2005

2010 2010

2009 2009

2008 2008

2007 2007

Class A

(2,000,000)

2004

$17.00

2003

$18.00

15%

2002

$19.00

4,000,000

2001

$20.00

Square Feet

$21.00

20%

6,000,000

$22.00

Deliveries

Vacancy %

The Atlanta office market posted its strongest quarterly absorption in more than a year in second quarter. Year-todate absorption now totals 100,752 SF. Office vacancy, however, still remains close to 20%. No deliveries occurred in the second quarter keeping office inventory at just over 200 million square feet.

MARKET REPORT | Q2 2010 | OFFICE | ATLANTA

VACANCY & AVAILABILITY •

Vacant Space-Space that is not currently •

Compared to this time last year, the vacancy rate is up 1.9%. This represents more than 4.3 million square feet of vacant space added over this period of time.

•

While vacancies in Atlanta’s office submarkets remain high, the current trend shows most of the submarkets’ vacancy rates flattening and in some cases falling. Positive absorption and the absence of new construction are reasons for this.

Sublease Space-Space that has been

Q2 2010 | Vacant Space By Type

Class B properties led the Atlanta market with more than 325,000 square feet absorbed in second quarter. Class A absorption was slightly negative for the quarter, yet still positive for the year.

•

With the exception of South Atlanta, Midtown and Northlake, year-to-date absorption in Atlanta’s office submarkets are outperforming last year’s figures.

•

Office leasing is expected to remain active through the end of the year, leading to positive absorption for 2010. Q2 2010 | Net Absorption by Submarket 120,000

footage that is committed to and signed for under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity for buildings under construction or planned.

CLASS A 21,717,389 SF VCY RATE = 21.5%

Build-to-Suit-A term describing property that

CLASS B 14,603,357 SF VCY RATE = 17.3%

CLASS C 2,990,346 SF VCY RATE = 19.5%

was developed specifically for a certain tenant to occupy. Can be either leased or owned by the tenant.

60,000 40,000 20,000 0 (20,000) (40,000) (60,000) (80,000)

Class A

Class B

Class C

NORTHLAKE

80,000

NORTH FULTON

100,000

MIDTOWN

Leasing Activity-The volume of square

•

(100,000)

NORTHEAST

that complete construction during a specified period of time. A certificate of occupancy must have been issued for the property for it to be considered delivered.

Office absorption in the second quarter was the strongest it has been in six quarters.

WEST ATLANTA

Deliveries-Buildings

•

SOUTH ATLANTA

leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Atlanta’s office vacancy rate dropped slightly from first quarter. The rate now stands at 19.6%, still in record territory.

CENTRAL PERIMETER

occupied by a tenant, regardless of any lease obligation on the space.

ABSORPTION & LEASING ACTIVITY

BUCKHEAD

Vacancy Rate-A percentage of the total amount of physically vacant space divided by the total amount of existing inventory.

DOWNTOWN

occupied space over a given period of time, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

NORTHWEST

Absorption (Net)-The net change in

Numerous requirements are currently in the market, many of which are large-sized deals of 100,000 square feet or greater. Some of these requirements are tenants who still have up to two years remaining on their current leases. With the market stabilizing, businesses are looking to take advantage of conditions before favorable concessions no longer exist and rental rates begin to climb. Given the volatility of today’s economy though, it is not likely the market will change drastically in favor of landlords anytime soon. There is still plenty of vacant office space in the market—a record amount. Job growth is the key factor to filling Atlanta’s office buildings. Local economists continue to forecast several years out before jobs begin returning at a more fervent pace.

Square Feet

DEFINITIONS

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

9000 Central Park

Central Perimeter

5/4/2010

$31,955,979

204,632

$156.16

Cox Enterprises

41, 47, 53 Perimeter Ctr. E

Central Perimeter

6/29/2010

$14,864,999

279,788

$53.13

Atlanta Property Group

250 Scientific Drive

Northeast Atlanta

6/1/2010

$7,150,000

45,117

$158.48

UNUM Life Insurance Co.

Loganville Medical Ctr.

Northeast Atlanta

5/19/2010

$5,275,000

15,242

$346.08

RiverOak Investment Corp.

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

Parkwood Point Two Alliance Center

Northwest Atlanta

GE Energy

EOLA Capital

106,638

Class A Lease

Buckhead

Novelis

Tishman Speyer

100,200

Class A Lease

One Alliance Center

Buckhead

Omnicom Group

Tishman Speyer

100,000

Class A Renewal

SunTrust Plaza

Downtown

Hawkins, Parnell, Thackston

SunTrust Plaza Assoc.

71,000

Class A Renewal

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | Q2 2010 | OFFICE | ATLANTA

UPDATE

Market Comparisons

VACANCY

BLDGS

CLASS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY SF

DIRECT VCY %

SUB VCY SF

SUB VCY %

URBAN DOWNTOWN A 25 B 65 C 58 Total 148

13,474,195 8,313,274 3,381,359 25,168,828

2,150,731 618,751 611,777 3,381,259

16.0% 7.4% 18.1% 13.4%

601,190 2,770 603,960

4.5% 0.0% 2.4%

MIDTOWN A B C Total

32 73 19 124

14,222,559 4,549,540 524,768 19,296,867

3,268,590 548,426 71,391 3,888,407

23.0% 12.1% 13.6% 20.2%

277,918 86,515 11,424 375,857

BUCKHEAD A 51 B 43 C 24 Total 118

14,539,079 4,617,662 572,170 19,728,911

3,853,889 754,832 46,461 4,655,182

26.5% 16.3% 8.1% 23.6%

9,273,210 1,922,009 729,629 11,924,848

SUBURBAN CENTRAL PERIMETER A 75 18,943,819 B 131 7,880,284 C 58 1,452,311 Total 264 28,276,414 NORTH FULTON A 99 B 212 C 23 Total 334 NORTHWEST ATLANTA A 74 B 315 C 52 Total 441

ABSORPTION VCY CURR %

VCY PRIOR %

2,751,921 621,521 611,777 3,985,219

20.4% 7.5% 18.1% 15.8%

22.0% 7.3% 15.1% 16.2%

207,625 (16,794) (102,652) 88,179

170,041 (40,979) (169,430) (40,368)

2.0% 1.9% 2.2% 1.9%

3,546,508 634,941 82,815 4,264,264

24.9% 14.0% 15.8% 22.1%

24.5% 14.3% 13.4% 21.8%

(57,680) 13,471 (12,580) (56,789)

(47,411) 25,036 (6,305) (28,680)

203,849 15,903 219,752

1.4% 0.3% 0.0% 1.1%

4,057,738 770,735 46,461 4,874,934

27.9% 16.7% 8.1% 24.7%

28.2% 17.4% 8.1% 25.1%

45,783 31,275 77,058

9,185 12,195 8,108 29,488

22.0% 11.0% 16.3% 18.6%

1,082,957 105,188 11,424 1,199,569

2.6% 0.6% 0.3% 1.9%

10,356,167 2,027,197 741,053 13,124,417

24.5% 11.6% 16.5% 20.4%

25.0% 11.8% 14.0% 20.6%

195,728 27,952 (115,232) 108,448

3,391,156 1,534,713 515,943 5,441,812

17.9% 19.5% 35.5% 19.2%

320,911 61,527 382,438

1.7% 0.8% 1.4%

3,712,067 1,596,240 515,943 5,824,250

19.6% 20.3% 35.5% 20.6%

19.4% 21.3% 36.0% 20.8%

14,111,016 9,388,364 637,052 24,136,432

2,161,868 2,115,517 27,111 4,304,496

15.3% 22.5% 4.3% 17.8%

396,745 156,907 6,533 560,185

2.8% 1.7% 1.0% 2.3%

2,558,613 2,272,424 33,644 4,864,681

18.1% 24.2% 5.3% 20.2%

15,829,582 14,851,049 1,620,767 32,301,398

2,393,667 2,985,939 246,483 5,626,089

15.1% 20.1% 15.2% 17.4%

409,967 119,931 529,898

2.6% 0.8% 1.6%

2,803,634 3,105,870 246,483 6,155,987

NORTHEAST ATLANTA A 58 5,969,741 B 300 11,819,698 C 38 1,128,459 Total 396 18,917,898

1,281,778 2,468,878 98,205 3,848,861

21.5% 20.9% 8.7% 20.3%

56,083 121,037 177,120

0.9% 1.0% 0.9%

NORTHLAKE A 20 B 279 C 91 Total 390

2,504,234 14,237,000 2,884,055 19,625,289

420,934 1,690,337 348,606 2,459,877

16.8% 11.9% 12.1% 12.5%

13,787 79,321 93,108

SOUTH ATLANTA A 20 B 178 C 50 Total 248

1,302,844 7,376,716 1,599,439 10,278,999

490,783 1,012,583 327,622 1,830,988

37.7% 13.7% 20.5% 17.8%

WEST ATLANTA A 1 B 35 19 C Total 55

71,500 1,407,920 1,501,552 2,980,972

5,580 219,942 678,790 904,312

URBAN TOTAL A 108 B 181 C 101 Total 390

SUBURBAN TOTAL A 347 B 1,450 C 331 Total 2,128

42,235,833 17,480,476 4,478,297 64,194,606

58,732,736 66,961,031 10,823,635 136,517,402

ATLANTA MARKET GRAND TOTAL A 455 100,968,569 B 1,631 84,441,507 C 432 15,301,932 Total 2,518 200,712,008

TOTAL VCY SF

DELIVERIES

NET NET NEW NEW ABSORP ABSORP SUPPLY SUPPLY CURR SF YTD SF CURR SF YTD SF

U/C

RENT

UNDER AVG CONSTR RENT SF RATE

$19.52 $16.33 $16.32 $18.51

752,710 752,710

$23.61 $17.86 $15.37 $22.45

915,626 915,626

$25.67 $18.97 $18.43 $24.55

131,815 (3,748) (167,627) (39,560)

1,668,336 1,668,336

$22.93 $17.72 $16.71 $21.84

(35,747) 81,569 6,559 52,381

79,942 66,130 7,472 153,544

$22.13 $18.93 $13.39 $20.79

17.6% 24.3% 6.0% 19.9%

(81,390) 11,288 4,812 (65,290)

(81,125) (51,698) 4,967 (127,856)

$19.67 $15.86 $17.55 $18.19

17.7% 20.9% 15.2% 19.1%

17.2% 22.3% 13.6% 19.3%

(81,642) 200,515 (26,542) 92,331

(125,434) 203,363 (32,545) 45,384

24,236 24,236

62,500 16,650 79,150

$20.70 $16.56 $12.80 $18.49

1,337,861 2,589,915 98,205 4,025,981

22.4% 21.9% 8.7% 21.3%

22.3% 22.1% 8.1% 21.3%

(8,737) 17,325 (6,996) 1,592

69,139 82,520 (3,527) 148,132

$19.52 $15.60 $15.19 $17.27

0.6% 0.6% 0.5%

434,721 1,769,658 348,606 2,552,985

17.4% 12.4% 12.1% 13.0%

15.5% 12.3% 11.4% 12.6%

(45,592) (16,345) (19,819) (81,756)

(42,028) (91,380) (8,266) (141,674)

$19.97 $17.35 $14.97 $17.53

17,963 5,784 23,747

1.4% 0.1% 0.2%

508,746 1,018,367 327,622 1,854,735

39.0% 13.8% 20.5% 18.0%

41.5% 14.1% 20.7% 18.6%

31,980 24,372 3,959 60,311

15,755 40,030 5,082 60,867

45,000 51,000 96,000

$21.42 $17.72 $13.54 $18.34

7.8% 15.6% 45.2% 30.3%

3,744 3,744

0.3% 0.1%

5,580 223,686 678,790 908,056

7.8% 15.9% 45.2% 30.5%

7.8% 14.5% 47.1% 30.8%

(18,936) 28,382 9,446

(16,343) 18,258 1,915

$25.34 $19.50 $10.25 $15.82

10,145,766 12,027,909 2,242,760 24,416,435

17.3% 18.0% 20.7% 17.9%

1,215,456 548,251 6,533 1,770,240

2.1% 18.8% 20.8% 1.3%

11,361,222 12,576,160 2,249,293 26,186,675

19.3% 18.8% 20.8% 19.2%

19.0% 19.2% 20.7% 19.2%

(221,128) 299,788 (9,645) 69,015

(83,751) 232,622 (8,559) 140,312

24,236 24,236

107,500 67,650 175,150

$20.57 $17.36 $13.96 $18.06

19,418,976 13,949,918 2,972,389 36,341,283

19.2% 16.5% 19.4% 18.1%

2,298,413 653,439 17,957 2,969,809

2.3% 0.8% 0.1% 1.5%

21,717,389 14,603,357 2,990,346 39,311,092

21.5% 17.3% 19.5% 19.6%

21.5% 17.7% 18.7% 19.7%

(25,400) 327,740 (124,877) 177,463

48,064 228,874 (176,186) 100,752

1,692,572 1,692,572

107,500 67,650 175,150

$21.76 $16.95 $14.38 $19.64

2,969,809 3,195,299 3,520,364 3,550,460 3,510,843

1.5% 1.6% 1.8% 1.8% 1.8%

39,311,092 39,488,555 37,719,272 36,657,823 34,928,876

19.6% 19.7% 19.0% 18.4% 17.7%

19.7% 19.0% 18.4% 17.7% 16.4%

177,463 (76,711) (978,852) (363,774) (616,472)

100,752 (76,711) (1,983,789) (1,004,937) (641,163)

1,692,572 1,692,572 2,544,176 2,461,579 1,096,406

175,150 100,150 1,730,222 1,812,819 3,177,992

$19.64 $19.72 $19.77 $19.83 $20.12

QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q2-10 Q1-10 Q4-09 Q3-09 Q2-09

2,518 2,518 2,514 2,512 2,504

200,712,008 200,712,008 199,019,436 198,936,839 197,571,666

36,341,283 36,293,256 34,198,908 33,107,363 31,418,033

18.1% 18.1% 17.2% 16.6% 15.9%

NOTE: STATISTICAL SET INCLUDES OFFICE PROPERTIES 15,000 SF AND UP, EXCLUDING SINGLE-TENANT OWNEROCCUPIED. WHILE COSTAR ATTEMPTS TO PROVIDE THE MOST ACCURATE DATA AT THE END OF EVERY QUARTER, REVISIONS ARE MADE THROUGHOUT THE YEAR ACCOUNTING FOR DISCREPANCIES IN PAST REPORTING.

1,692,572 82,597 1,365,173 854,655

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | Q2 2010 | OFFICE | ATLANTA

CONSTRUCTION •

For the first time in sixteen years, Atlanta had no new office space deliver in the quarter. The development horizon remains in check.

•

New office construction is mostly concentrated in small, 1 to 3-story suburban office buildings.

480 offices in 61 countries on 6 continents

suggested these small declines are the first signs of stabilization. •

Because of Atlanta’s office availability, prospective tenants continue to benefit on rents and concessions. Larger tenants in the market can expect to receive the most enticing offers.

United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95

RENTAL RATES •

•

INVESTMENT ACTIVITY

Average quoted rental rates are down for the ninth consecutive quarter. Over this course of time rates have dropped 6.7%.

•

The latest drops in quoted office rents have been minimal over the past few quarters. It is

Office investment is up signficantly from this time last year. Total sales volume at mid-year 2010 has already surpassed the total sales volume for all of 2009.

•

$2 billion in annual revenue

• Over 2 billion square feet under

management • Over 15,000 professionals

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

NONE Canton GAINESVILLE Cumming

CHEROKEE CO. FULTON CO. FUL L FORSYTH CO. FOR R

Allatona Lake

Emerson

Lake Lanier

Woodstock CHEROKEE CO.

Acworth

Sugar Hill

FO RS FU

Mountain Park

CO . CO .

NORTHEAST ATLANTA

e hooch e tac

Cha t

PAULDING CO. COBB CO.

Alpharetta Roswell

NORTHWEST ATLANTA

Bras

H YT O LT

BARTOW CO.

OFFICE SUBMARKETS

Buford

HA GW INN LL CO . ETT CO .

NORTH FULTON Rive r

BARTOW CO. CHEROKEE CO.

Cartersville

Duluth

316 CO BB FU LT CO O . N CO .

MARIETTA

CENTRAL PERIMETER

Lawrenceville

DORAVILLE Norcross

CHAMBLEE SMYRNA

NORTHLAKEG

W IN DE NE KA TT LB C CO O. .

BUCKHEAD Austell COBB CO. DOUGLAS CO.

Clarkston

WEST ATLANTA

ch e

Douglasville

CO .

MIDTOWN DECATUR DE ECA ATUR Avondale Estates Estate

DOWNTOWN

W AL TO N

CO .

att

ho ac

ATLANTA

Snellville

Stone Mountain G W IN NE TT

R iv

PAULDING CO.

DEKALB CO. C FULTON CO. C

Powder Springs

DEKALB HENRY

Hartsfield-Jackson International Airport

FULTON CO. COWETA CO.

Palmetto

FOREST PARK

SOUTH ATLANTA Riverdale Riverda

Fairburn

CO. CO.

Conyers Covington RO C NE KDA WT LE ON CO CO . .

CLAYTON LAYT L A ON CO.

Union City

675

DE KALB RO CO CK . DA LE CO .

Lithonia EAST POINT COLLEGE PARK HAPEVILLE

Stockbridge

. ON CO FULT CO. TTE FAYE

The Atlanta office market consists of ten submarkets. They include the urban markets of Downtown, Midtown and Buckhead, and the suburban markets of Central Perimeter, North Fulton, Northwest Atlanta, Northeast Atlanta, Northlake, South Atlanta and West Atlanta. The major interstates in the region include: I-75, I-85, I-285, I-575, I-985, I-675 and I-20. Georgia 400 and US 316 also play important roles to Atlanta’s transportation system.

UNITED STATES: Atlanta Mike Spears SIOR Senior VP | Colliers Manager 1349 West Peachtree Street Suite 1100 Atlanta, Georgia, 30309 TEL +1 404 888 9000 FAX +1 404 870 2845

RESEARCHER: Atlanta Scott Amoson Director of Research 1349 West Peachtree Street Suite 1100 Atlanta, Georgia, 30309 TEL +1 404 877 9286 FAX +1 404 870 2845

Jonesboro

McDonough BU TT S

CO .

HENRY CO. CLAYTON CO.

Fayetteville

Newnan Peachtree City

This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International-Atlanta, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 480 offices throughout more than 61 countries worldwide.

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